On January 1, Prine, Inc., acquired 100 percent of Lydia Company's common stock for a fair value of $123,709,250 in cash and stock. Lydia's assets and liabilities equaled their fair values except for its equipment, which was undervalued by $697,500 and had a 10-year remaining life. Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia's artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia's assets and liabilities (including $52,240,250 of goodwill) to a newly formed operating segment appropriately designated as a reporting unit. The fair values of the reporting unit's identifiable assets and liabilities through the first year of operations were as follows. Account Cash Receivables (net) Movie library (25-year life) Broadcast licenses (indefinite life) Equipment (10-year life) Current liabilities Long-term debt Fair Values 1/1 12/31 291,000 $ 209,500 584,000 1,050,000 40,700,000 66,080,000 15,230,000 20,180,000 21,380,000 19,290,000 (496,000) (655,000) (6,220,000) (6,605,000) However, Lydia's assets have taken longer than anticipated to produce the expected synergies with Prine's operations. Accordingly, Prine reviewed events and circumstances and concluded that Lydia's fair value was likely less than its carrying amount. At year-end, Prine reduced its assessment of the Lydia reporting unit's fair value to $116,659,500. At December 31, Prine and Lydia submitted the following balances for consolidation. There were no intra- entity payables on that date. Revenues Operating expenses Equity in Lydia earnings Dividends declared Retained earnings, 1/1 Cash Receivables (net) Investment in Lydia Broadcast licenses Movie library Equipment (net) Current liabilities Long-term debt Common stock Prine, Inc. Lydia Co. $ (21,700,000) $ (17,300,000) 19,600,000 13,300,000 (3,930,250) NA 500,000 80,000 (66,000,000) (3,271,500) 395,750 209,500 285,000 1,050,000 127,559,500 NA 505,000 14,210,000 372,500 44,500,000 142,800,000 23,600,000 (787,500) (668,000) (24,600,000) (8,210,000) (175,000,000) (67,500,000) reporting unit's fair value to $116,659,500. At December 31, Prine and Lydia submitted the following balances for consolidation. There were no intra- entity payables on that date. Revenues Operating expenses Equity in Lydia earnings Dividends declared Retained earnings, 1/1 Cash Receivables (net) Investment in Lydia Broadcast licenses Movie library Equipment (net) Current liabilities Long-term debt Common stock Prine, Inc. Lydia Co. $ (21,700,000) $(17,300,000) 19,600,000 13,300,000 (3,930,250) NA 500,000 80,000 (66,000,000) (3,271,500) 395,750 209,500 285,000 1,050,000 127,559,500 NA 505,000 14,210,000 372,500 44,500,000 142,800,000 23,600,000 (787,500) (668,000) (24,600,000) (8,210,000) (175,000,000) (67,500,000) a. What is the relevant initial test to determine whether goodwill could be impaired? Goodwill is impaired if the fair value is less than carrying value b. At what amount should Prine record an impairment loss for its Lydia reporting unit for the year? Impairment loss b. At what amount should Prine record an impairment loss for its Lydia reporting unit for the year? Impairment loss c. What is consolidated net income or loss for the year? Consolidated net d. What is the December 31 consolidated balance for goodwill? Consolidated goodwill e. What is the December 31 consolidated balance for broadcast licenses? Consolidated broadcast licenses f. Prepare a consolidated worksheet for Prine and Lydia (Prine's trial balance should first be adjusted for any appropriate impairment loss). (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) PRINE AND LYDIA Consolidated Worksheet For Year Ending December 31, 2015 Consolidation Entries Accounts Prine, Inc. Lydia Co. Debit Credit Consolidated Totals Revenues Expenses Equity in Lydia earnings Impairment loss Net income/loss $ 0 $ 0 $ 0 Retained earnings 1/1 Dividends declared Net income Retained earnings 12/31 0 $ 0 $ 0 $ $ 0 Equity in Lydia earnings Impairment loss Net income/loss $ 0 $ 0 0 Retained earnings 1/1 Dividends declared Net income Retained earnings 12/31 0 $ 0 $ 0 $ 0 Cash Receivables (net) Investment in Lydia, Co. Broadcast licenses Movie library Equipment (net) Goodwill Total assets $ 0 $ 0 $ 0 Current liabilities Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity 0 $ 0 $ 0 $ 0